UK Politics

Tax credit change could cost families £4k a year - Labour

  • 11 February 2012
  • From the section UK Politics
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Low income families with parents in part-time work could lose nearly £4,000 per year because of a change in tax credits, the Labour Party says.

Families can currently qualify for Working Tax Credit if one parent works at least 16 hours a week.

About 212,000 families could be hit from April when the threshold is raised to 24 hours per week, the official data highlighted by Labour shows.

The Treasury said new measures to help working families were being introduced.

Couples can apply for the credit as long as they make a joint claim. However the money will be paid to the person who works part-time.

There is a basic amount available for each application, and then additional elements depending on whether you have applied as a couple or as a lone parent.

Treasury Minister Chloe Smith said the policy was part of "what we have to do as a country to get out of the enormous deficit mess left by Labour".

She told BBC News the policy was not unfair because it "levels two parent households with what lone parents have to do", adding that Labour would have to decide whether or not they agree with that.

Figures obtained by Labour's Treasury spokeswoman Cathy Jamieson show 212,000 households - with a total of 470,000 children between them - could lose the £3,870-a-year credit because of the change.

The region with the most households likely to be affected is said to be London (46,205), followed by the North West (26,845), West Midlands (22,675) and Yorkshire and the Humber (20,225).

BBC political correspondent Naomi Grimley reports that shadow ministers are suggesting it might be difficult for parents to increase the amount of time they work as many companies were cutting employees' hours because of the tough economic climate.

'Nothing fair'

Shadow chief secretary to the Treasury Rachel Reeves told the BBC it had taken Labour some time to go through the figures and talk to people who would be affected by the changes.

She said: "So many families have no idea this is coming.

"It's something now that's gaining traction as people realise what impact these government policies will have on them.

"In normal circumstances you might think these people will be able to take extra hours on but we know, at the moment, businesses and the public sector aren't taking on workers or giving extra hours' work either."

But a Treasury spokesperson said Labour's figures ignored the other measures it had taken.

These include increasing working age benefits by 5.2% in April and the child element of Child Tax Credit by inflation.

The spokesperson added that fuel duty had been cut and council tax was frozen.

"When it is introduced, the Universal Credit will give nearly three million households a higher level of entitlement and enable more parents to get into work by helping 80,000 families with childcare support."

The spokesperson added: "Ultimately there is nothing fair about running huge budget deficits and burdening future generations with debts we cannot afford to pay."

Ms Reeves denied Labour was being disingenuous saying: "The government's own figures show that they expect 82,000 families will lose the full amount of their tax credit."

She said the coalition was choosing to "hit women and families particularly hard with the cuts they are introducing".

She added: "In an environment where we know that there are many people working part time because there aren't the full time jobs available, this is the wrong policy at the wrong time for thousands of families."

Imran Hussain, from Child Poverty Action Group charity, told the BBC that many families were going to struggle, especially in the current economic climate.

He added: "The bizarre thing about this is the government's fundamental policies around welfare reform are about abolishing this kind of qualifying period of hours."

John O'Connell from the pressure group Taxpayers' Alliance called the tax system "complicated and too burdensome".

He said it encouraged a culture of dependency for both those out of work and working families penalised by having too much taxed in the first place.

"We need to leave more money in the pockets of people who earn the money in the first place," he said.

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